ExpertMedium1 markMultiple Choice
CPA · Question 08 · Area I: Ethics & General Principles
In an audit of a nonissuer, the auditor identifies a significant deficiency in internal control that is not considered a material weakness. Under AU-C 265, which of the following statements correctly describes the auditor's communication responsibility?
In an audit of a nonissuer, the auditor identifies a significant deficiency in internal control that is not considered a material weakness. Under AU-C 265, which of the following statements correctly describes the auditor's communication responsibility?
Answer options:
A.
The auditor is not required to communicate significant deficiencies, only material weaknesses.
B.
The auditor must communicate the significant deficiency in writing to those charged with governance.
C.
The communication must be made prior to the audit report release date.
D.
The auditor must communicate the deficiency orally to management and document the oral communication.
How to approach this question
Recall AU-C 265 requirements: What (Sig Def & MW), To Whom (Governance & Mgmt), How (Writing), When (within 60 days of report release).
Full Answer
B.The auditor must communicate the significant deficiency in writing to those charged with governance.✓ Correct
The auditor must communicate the significant deficiency in writing to those charged with governance.
AU-C 265 mandates that significant deficiencies and material weaknesses be communicated in writing to those charged with governance and management. While the auditor may discuss them orally, the final communication must be written.
Common mistakes
Thinking only material weaknesses need reporting; thinking oral communication is sufficient; confusing the timing (prior to report vs. 60 days after).
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